Owning a rental property can be a smart way to increase your wealth — but it’s not without its risks. Your rental property is extremely valuable, and one of your roles as a landlord is to be the protector of your expensive investment. You need to make sure that you have the right insurance and legal protections, and you need to be careful about who you rent your property to. If you do all of that, you’ll be keeping your property as safe as possible while maximizing your potential return on your real estate investment.
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The risks faced by your rental property
As any good landlord knows, a real estate property faces threats from all sides. For starters, a rental property faces all of the same threats that a personal home does. Problems with the building’s systems, such as plumbing and electrical disasters, can damage or even destroy the property. Natural disasters, too, can threaten the space.
On top of that, rental property owners need to worry about the people that are actually living on their property. A bad tenant can be one of the most financially damaging things possible for a rental property. Tenants can refused to pay rent, put up legal fights to stay in the space even if you try to evict them, and — perhaps worst of all — they can contribute both actively and passively to the deterioration of your space. A bad tenant won’t let you know when small problems with your space arise, which will enable them to get worse. And a bad tenant may even vandalize the space or destroy it through a hard-partying or careless lifestyle. You can report bad tenants to credit agencies to help others, but, by then, it will be too late for you.
Protecting your space with insurance
Protecting your property from this diverse roster of serious threats takes smart planning, vigilance, and a little bit of know-how. The first thing that landlords need to know about protecting their space is that landlord insurance is not optional for responsible income property owners.
Just as homeowners should never go without homeowners insurance, landlords should never go without landlord insurance. A good insurance policy will protect you from the financial fallout that could come with a natural disaster or a problem with your property’s systems — not to mention threats like break-ins, vandalism, and even lawsuits. Yes, lawsuits can be an issue for landlords because you could be liable for injuries and accidents that happen on your property even if you don’t live there. Make sure that you have an insurance policy with liability coverage, and speak to an attorney about setting up your business interests in a way that insulates your personal finances from those of your real estate business.
Finding the right tenants
Natural disasters, break-ins, and other unpredictable problems can be handled through insurance. But there’s another threat that is more directly related to your responsibilities as a landlord which is that of your tenants themselves. How can you ensure that your tenants are the right fit for your space?
It starts, of course, with landing some potential tenants. You need to advertise your rental property online. Most would-be renters (and buyers, for that matter) in search for their next home online, so your property needs to be on the internet.
The nature of your post matters a whole, lot, too! Remember marketing principles and best practices. Earn the attention of high-class tenants by posting quality photographs, a compelling description, and a clear call to action. An online rental application will make it easier for potential tenants to decide on your property.
Finally, and perhaps most importantly, use a service that will allow you to perform a background check and a credit check on your would-be tenants. Thorough research now will help you be sure that you’re getting the kind of reliable, upstanding tenants that will help you earn income through your property while preserving its long-term worth.
Do you own rental property?
What are your favorite tips for protecting it?
Share your thoughts and comments with us.